This week, with the news of a Bitcoin spot ETF, the overall cryptocurrency market sentiment is bullish. Among the top ten cryptocurrencies by market capitalization, apart from Bitcoin (BTC), the token with the highest percentage increase is Solana protocol's $SOL.

In last year's FTX collapsed , Solana suffered significant damage. It was not only the crash in the price of the $SOL token that had an impact, but also the liquidity of the on-chain ecosystem, the cross-chain tokens like soBTC, soETH, and the underlying DEX protocol Serum, among others. These on-chain infrastructures were provided or sponsored by FTX. The collapse led to a drain in liquidity, the cross-chain tokens going to zero, and security risks for the underlying liquidity protocol, Serum. As a result, Solana's TVL plummeted from a billion dollars TVL before the incident to a low of $200 million.

However, thanks to the resilience of the Solana community and continuous efforts from the foundation, nearly a year after the FTX incident, Solana has not only seen a recovery in the price of the $SOL token to levels close to before the incident, but Solana's on-chain TVL has also increased by almost 90% from its low earlier this year, rising to $380 million.

In such a challenging environment this year, undoubtedly, the best-performing protocol in the Solana ecosystem is Jito. Jito went live on the mainnet in November 2022, precisely during the most challenging period following the FTX collapsed. Its TVL, which started at four million dollars, has now surpassed a hundred million dollars after just one year. It's now the second-ranked protocol in terms of on-chain TVL, just behind Marinade Finance, the Solana liquidity staking protocol.

This week on CryptoSnap, Dr. DODO introduces everyone to Jito, the rising star in the Solana DeFi ecosystem, giving us an insight into what magic makes Jito perform so well despite the challenging crypto market conditions and its position in Solana's already challenging environment.

What is Jito?

Jito is a liquidity staking protocol launched by Jito Lab. The Jito Lab team secured a $10 million Series A funding round in August 2022, led by Multicoin Capital and Framework Ventures, with participation from Solana Ventures and Solana Labs co-founder Anatoly Yakovenko.

Jito is known as the first liquidity staking product on Solana with MEV rewards. Unlike other existing liquidity staking protocols, Jito offers additional MEV rewards to stakers on top of staking rewards. Apart from focusing on liquidity staking, Jito Lab is also attentive to the MEV space. They are the development team behind Jito-Solana, the first third-party validator client on Solana. Through the architecture of Jito-Solana, they can efficiently capture MEV earnings within the Solana network and reduce the chances of network congestion caused by ineffective dust attacks.

The Jito-Solana client introduces an auction mechanism similar to the Flashbot auction on the Ethereum mainnet. Traders submit bids for sequences of transactions they deem profitable. These bids are then run through a complex simulation by third-party block engines to find the most valuable transaction combinations. These bids are subsequently distributed to validators and token holders (JitoSOL), eliminating dust attacks while increasing rewards for token holders.

Flashbot + Lido = Jito

According to the recent Solana Foundation’s Validator Health Report: October 2023, since its initial launch in August 2022, the Jito Labs client, Jito-Solana, has seen its network share increase from 0% to 31%. It's currently the only third-party client, and the auction mechanism introduced by Jito-Solana has successfully set it apart from official validators, attracting many stakers to use it. This growth showcases the unique value proposition that Jito-Solana brings to the Solana network.

Jito's emergence not only addresses Solana's troublesome MEV issue but also reduces network congestion and potential outages. With Lido's announcement of exiting the Solana staking arena, Jito is poised to gain more Sol liquidity staking share.

Additionally, the absence of governance tokens for Jito has attracted many airdrop hunters. Currently, Jito is running a reward program where holding JitoSOL and depositing it on lending platforms or providing liquidity can earn you rewards. There's also a referral mechanism that rewards participants for bringing in more users.

Author's Perspective

In the author's view, the Solana ecosystem is undoubtedly an area worth watching. After a year of lows, projects that lacked community support or failed to deliver have already been filtered out. Those that have survived represent strong community backing and continued development efforts. Among the many projects, those that haven't yet launched their tokens are particularly interesting.

Therefore, the introduction of the Jito is because it meets the above three criteria. The author sees Jito as a potential game-changer on Solana, with tremendous potential. Besides Jito, other projects like kamino and marginfi also fit these criteria and are worth your attention and participation.